El Al Israel Airlines is regarded with both disdain for its inability to respond to a newly liberalised market it knew for years was going to happen, and yet loved as a symbol of Israels’ struggle to survive in the early years of independence.
It doesn’t matter what you think of Israel, from an aviation perspective, it’s frankly a joke that an airline so heavily protected from genuine competition for so long has totally failed to see the liberalisation writing on the wall.
There seems to have been some sort of “it’ll never happen” approach by managers who believed that often sclerotic Israeli governments would never let it struggle, because it was a strategically important asset in a troubled world.
They were wrong. Finally Israel is seeing genuine competition. With only one vital major airport at Ben Gurion International, in the strategic centre of Israel between Jerusalem and Tel Aviv – the size of which makes it one of the largest single facilities in the entire country, El El is learning that its bloated costs, and isolationist policies after years of a near monopoly, are making it hard to make ends meet.
Boeing Dreamliners will replace many of the airlines older aircraft, fuel costs have dropped, efficiencies on fuel burn have improved.
Pilots however wanted – and want – more. And they have the industrial muscle to make it happen. All 550 of them are Israeli because the airlines policies are to only hire citizens. They have the company over a barrel. Israeli pilots earn around $206,000 a year; $18,000 more than a top United Pilot for example.
Pilots have taken to simply not turning up for work, because they’re almost impossible to fire, and delays and cancellations have been rife. The public backlash has been predictable.
International competition has merely added to its woes. From 2013 Israeli open skies policy allowed domestic and external airlines to compete in the country. Traditional airlines like British Airways, United, Air France, Lufthansa were joined by easyJet, RyanAir and Aegean, as well as Turkish – connecting to major international hubs at far less than El Al could even begin to offer. Those connections matter, as Israel has no flights to anywhere East of Jordan. Many (actually most) muslim countries ban Israeli flights and will not cross Israeli territory, or carry Israeli passport holders.
El Al faced up to the challenges presented it with a weak and much criticised effort at creating its own low-cost labelled airline, UP. It has just four 738’s. UP offers just five winter routes, all to eastern European destinations. And it isn’t that cheap. A return fare to Berlin on UP is $238 in mid January, the same dates on easyJet cost you $172.
Long haul has also been suffering despite high utilisation rates of 84%. Competition is driving down prices, while costs keep rising. It’s the worst sort of nightmare, and the company seems completely stuck, as it spirals closer to being in a downward cycle it can’t get out of.
Until the government leaves it completely alone to do what it needs to do, politicians stop using it as a political football, and it makes painful structural and cultural changes, it’s going to face a very tough road ahead.
In many ways the situation at El Al is not unlike Alitalia. Institutionalized and politicised for so long, hide bound by rules and contracts that are simply unsustainable in a free market.
The Italian government realised it was simply sinking vast amounts of money into a bottomless pit in a privately owned company, and has now drawn the line, and accepted reality. Israel will have to do the same.